Hoarders unloaded £70bn before euro

A STAGGERING £70bn of hoarded banknotes was unloaded in the 12 countries of euroland before the switch to the single currency. Deutschmarks in circulation slumped an astonishing 46%, other currencies 25%.

The huge figures emerge from the European Central Bank's annual report. Overall, currency in circulation fell 32% - 'a massive decline'.

The markets showed scant respect for the ECB report as the euro dipped to 61.3p, hit by Jean-Marie Le Pen's French election success.

The report showed the eurozone's growth slowing to 1.5% last year against 2.4% in Britain. It came as Bank of England Deputy Governor Mervyn King warned that the UK economy, with its strong consumer spending and hard hit manufacturing, needs to 'rebalance'.

King believes big trade deficits in the UK and US 'cannot be sustained indefinitely'. He warned that some currencies may slump. He hinted at higher UK interest rates, and said the Bank 'will take whatever steps necessary' to keep inflation on track.

The CBI sees signs of industry recovering at last. Its April survey found manufacturers' confidence positive by a net 21% for the first time in two years, though job cuts continue.

Euroland is also recovering with Germany set to grow 2.4% this year, sid the German research institutes. They expect ECB interest rates to rise 0.5% to 3.75%. Though consumer groups complained that the changeover to euros was responsible for the 0.5% rise in inflation in January, the ECB said it caused only 0.16% of the rise.

ECB president Wim Duisenberg again warned countries with a structural budget deficit to seek a 'balanced budget or surplus as soon as possible'. The ECB made a hefty £1.1bn profit last year, and shared some of it among member countries.